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City explores bankruptcy
May 16, 2009, 12:00 AM By Dana Yates

Two of Northern California’s top bankruptcy attorneys will visit Half Moon Bay Tuesday to explain to the City Council how it could go about filling Chapter 9 bankruptcy, said Mayor John Muller.

The council is exploring ways to pay an $18 million settlement over a land dispute. It is pursuing state legislation for a loan, but if it cannot raise the cash soon it will be forced to pay developer Charles "Chop” Keenan the full amount before the end of the year. The settlement threatens to bankrupt the city.

State Sen. Leland Yee, D-San Francisco/San Mateo, and Assemblyman Jerry Hill, D-San Mateo, are working together on legislation that would require the California Infrastructure and Economic Development Bank, a low-interest financing authority, to loan the city $10 million as soon as the bill is signed into law.

The bill SB/AB 650, recently passed out of the Local Government Committee, but hit a bump in the Senate Natural Resources and Water Committee when the chair questioned the use of the "I-Bank” to loan money to the municipality.

The bill continues to change as legislators seek its passage. It started as a $10 million allocation from Proposition 84, the park bond, to Half Moon Bay for the preservation of the disputed property. It was then changed to a loan, but may not meet "I-Bank” requirements. Former state assemblyman Gene Mullin also attempted to pass legislation previously to ease Half Moon Bay’s financial hardship.

Options seem to be running out for Half Moon Bay, but Muller is still hopeful.

"I’m very confident [that legislation will be passed]. I have to be,” Muller said.

Without legislation, the city is seriously considering filing Chapter 9 bankruptcy, essentially following in the footsteps of Vallejo.

The lawyers at Tuesday’s meeting includes one that represents Vallejo and will explain the bankruptcy process and "how difficult it is,” Muller said.

Unlike Chapter 10 or Chapter 11, a municipality faces stricter regulations for filing for bankruptcy and must still pay all its debts, Muller said.

The meeting is informational and no decisions will be made. However, Muller suggests any resident who thinks bankruptcy could be an easy out for the city should attend, he said.

Half Moon Bay spent more than a decade in a legal dispute with Keenan over the Beachwood property. In 2007, Half Moon Bay was slapped with a $41 million federal judgment for trying to prevent development on the property by allegedly making it into wetlands. That judgment was later dropped when Keenan agreed to a settlement that allowed the city to pursue state legislation allowing him to build on the site or else pay him $18 million.

The Half Moon Bay City Council meets 7 p.m. Tuesday, May 19 at the Ted Adcock Community Center, 535 Kelly Ave.

Dana Yates can be reached by e-mail: or by phone: (650) 344-5200 ext. 106.

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